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2007 Paper AM - Q.2 Ingrams IRR calc for nom return
Cant understand IRR calc for nominal req rate of return.
Arent PV (the current portfolio) 4m, and payments both negative inputs, as PV always negative ?? and withdrawals / pmt 205,000 going out from it
I worked out the answer just using PV as neg, leaving Payments and FV positive as this is what you want to be left with, just to see what the result was and you get i/y 4.84% - same answer.
2 options given in answer key:
1) N = 35 PV 4m pmt -205,000 FV -3m, I/y = 4.84%
Pmt and FV neg here. dont understand.
2) N = 35 PV -4m pmt 205,000 FV -3m, I/y = 4.84%
Both PV and FV neg here. dont understand.
Thanks very much.